Unveiling Chhattisgarh's Steel Industry-A BigMint Report

• Mills in Chhattisgarh dependent on NMDC for procuring iron ore
  
  
• Chhattisgarh-The Nation's Steel Giant with the Second Largest Capacity
  
  

India, the second-largest steel-producing country in the world, produced 144 million tonnes (mnt) of crude steel in fiscal year 2023-24 (FY'24) with a growth rate of 28% in the last five fiscals since FY'19. BigMint estimates that the country is set to achieve a notable 47% growth by 2030, with production likely to reach 210 mnt. The steel industry contributes to around 2% of the country's GDP.

Nestled in the heart of India, Chhattisgarh stands tall as a mineral-rich powerhouse, playing a pivotal role in the nation's steel industry. Chhattisgarh has the second largest steel capacity in the country and is the third-largest steel-producing state. In FY'24, it contributed an impressive 19 mnt of crude steel, accounting for 13% of India's total production.

This achievement places Chhattisgarh among the country's most significant iron ore-producing states, a status shared with its counterparts, Odisha and Jharkhand. Odisha, the leader of the pack, produced an astounding 26 mnt of crude steel during the same period, while Jharkhand delivered a solid 20 mnt. Together, these three states form the backbone of India's steel production, their abundant reserves of iron ore fuelling the industry's growth.

BigMint projects that Chhattisgarh is poised to achieve a significant growth rate of 50% by FY'30, with production expected to reach 27 mnt and steel capacity anticipated to rise to approximately 38 mnt.

Chhattisgarh's resource utilisation for FY'24 steel production

In FY'24, Chhattisgarh utilised significant quantities of raw materials for crude steel production of 19 mnt. The state consumed 36 mnt of iron ore, 14.5 mnt of non-coking coal, and 8.5 mnt of coking coal. Additionally, 8.7 mnt of sponge iron, 3.3 mnt of ferrous scrap, and 0.5 mnt of pig iron were the other essential inputs. These figures highlight the substantial resource demand required to sustain Chhattisgarh's steel production capabilities.

Raw material sourcing

Iron ore

Steel producers in Chhattisgarh are dependent on NMDC for procuring iron ore, given the proximity and high-grade ore availability in addition to captive mines located in Chhattisgarh.

Manufacturers in Chhattisgarh actively participate in auctions conducted by entities such as Odisha Mining Corporation (OMC) for the procurement of iron ore lumps and fines. Some volumes are also sourced from Chandrapur, Maharashtra.

In FY'24, Chhattisgarh produced 45 mnt of iron ore, with 36 mnt being self-consumed. Looking ahead, the state's iron ore demand is projected to rise to approximately 55 mnt by FY'30, to support the expected crude steel production of 27 mnt in that year.

Coal

Indian steel manufacturers rely heavily on coal for producing steel, power, sponge iron, and in billet reheating furnaces used to manufacture finished products.

Currently, approximately 40% of the coal requirement for sponge iron is met through imports. Key import sources include South Africa, Indonesia and Australia.

Additionally, sponge iron producers procure coal domestically from Coal India Limited (CIL), with prominent subsidiaries such as the South Eastern Coalfields Limited (SECL) and Mahanadi Coalfields Limited (MCL) and others serving as major suppliers.

In FY'24, SECL in Bilaspur achieved record coal production of 187 mnt underscoring its vital role in meeting Chhattisgarh's growing coal demand. For FY'25, SECL has been assigned an ambitious production target of 206 mnt, highlighting the state's increasing reliance on domestic coal to support the steel industry.

In Chhattisgarh, coking coal consumption in FY'24 was 8.5 mnt, while non-coking coal consumption reached 14.5 mnt. This strategic mix of both imported and domestic coal ensures a balanced and reliable supply chain, crucial for the state's sponge iron manufacturers.

Contribution of BF & IF mills in crude steel production

Chhattisgarh's crude steel capacity is projected to grow significantly from FY'24 to FY'30, with major expansions across all production routes. Blast furnace (BF) capacity is set to rise marginally from 15.2 to 16.2 mnt, while basic oxygen furnace (BOF) and electric arc furnace (EAF) capacities will see steady growth from 11.2 and 5.32 to 12.2 mnt and 6.52 mnt, respectively.

Induction furnace (IF) and direct reduced iron (DRI) capacities are poised for sharp rises from 12.9 mnt to 20 mnt and 12.39 mnt to 22 mnt, respectively highlighting a shift toward secondary steelmaking methods. Pellet capacity will also surge from 10.8 mnt to 18 mnt, supporting the growth of DRI-based production. Overall, total crude steel capacity is expected to grow from 29.5 mnt to 38 mnt, reflecting India's robust infrastructure development and demand potential.

No. of furnaces and plants in Chhattisgarh

1. BF-BOF units: Major steel producers like SAIL, JSPL, JSW, Jayaswal Neco, and the recently added NMDC operate blast furnace units in the state with total steel production capacity of around 15 million tonnes per annum (mntpa).

2. Sponge iron plants: Chhattisgarh hosts approximately 91 sponge iron plants with a combined production capacity of around 14 mntpa.

3. Pellet plants: The state has eight major pelletisation units, with a total production capacity of around 10.8 mntpa.

4. Ferro alloys units: There are 33 ferro alloy units in the state, with a total production capacity of 0.9 mntpa.

5. Long products rolling capacity: Chhattisgarh is home to over 170 operational steel rolling plants with a combined production capacity of approximately 22 mntpa. These plants produce a variety of long steel products, including rails, rounds, structures, wire rods, and rebar.

These facilities underline Chhattisgarh's prominence as a key steel-producing state in India.

Overall steel capacity of Chhattisgarh:

The state has crude steel-making facility through both the routes with similar facility of rolling mills for the entire steel product mix. Below is a list of capacity in the state in terms of various steel products.

Infrastructure for sourcing and transporting raw materials

Chhattisgarh's steel industry benefits from a well-established infrastructure for sourcing and transporting raw materials, making it a key hub for steel production in India. The state has abundant reserves of iron ore, coal, and limestone, which are essential for steelmaking. Efficient rail and road networks, along with proximity to key mining regions, ensure seamless movement of raw materials to production facilities. The development of dedicated freight corridors and improved logistics systems further enhance connectivity, reducing transportation costs and ensuring timely supply. These factors collectively position Chhattisgarh as a competitive and resource-rich destination for the steel industry.

Metallic mix ratio

Chhattisgarh's steel industry primarily relies on sponge iron due to its abundant iron ore resources. The typical ratio of sponge iron to melting scrap (including pig iron) in steel production is 85:15.

The state's numerous rolling mills generate significant amounts of end-cut scrap from rebar, structural steel, and pipes. This scrap, with a high recovery rate of 96-97%, is recycled and used in steelmaking.

Additionally, Chhattisgarh sources heavy melting scrap (HMS) from neighbouring regions like Odisha and Vizag. HMS, which has a yield recovery of 92-94%, is an important component of the metallic mix.

Steelmakers in Chhattisgarh also actively participate in scrap auctions conducted by the Bhilai Steel Plant, Kalpataru, and the Railways. This further diversifies their scrap supply and contributes to the overall metallic mix.

Trade dynamics

Chhattisgarh's Raipur DRI market faces stiff competition from Odisha's cost-effective sponge iron hubs like Jharsuguda, Barbil, and Dhenkanal. Similarly, Raipur's pellet and silico manganese markets contend with Odisha and West Bengal. In semi-finished steel, Raipur sets price trends which significantly impact the southern and northern markets. Meanwhile, the state's finished steel segment, including rebar, wire rod, and structural steel, competes closely with Maharashtra and West Bengal.

Upcoming capacities

India's steel industry is poised for significant growth, with notable capacity expansion approvals in FY'24 across key segments. Iron ore beneficiation is set to expand by 35 mntpa, while pellet capacity will grow by 36 mntpa, supporting raw material supply for steel-making. Sponge iron production is expected to rise by 19 mntpa, alongside a 16-mntpa increase in induction furnace capacity and an 11 mntpa expansion in blast furnace operations.

In downstream production, longs rolling capacity is slated for an 18-mntpa increase, ensuring enhanced output for construction and infrastructure projects. These expansions highlight India's commitment to bolstering its steel sector to meet rising domestic and global demand.

Challenges facing Chhattisgarh's steel industry

Chhattisgarh plays a key role in India's steel production, but the industry faces several challenges that must be addressed for continued growth:

1. Raw material availability

Securing a steady supply of quality iron ore and coal is critical to maintaining production capacity amidst rising demand.

2. Logistics constraints

Inefficiencies in transportation infrastructure can lead to delays and higher costs, impacting overall production.

3. High electricity tariffs

Rising energy costs are a significant challenge, with electricity tariffs adding to the production cost burden.

4. Policy support for green steel

Stronger policy backing and subsidies for green steel technologies are essential for sustainability and competitiveness.

5. Competitive market

The steel industry faces intense competition both domestically and internationally, requiring constant innovation and efficiency improvements.

6. Raw material quality

The quality of iron ore and coal can affect the efficiency and quality of steel production, making material processing improvements crucial.

Addressing these challenges will help Chhattisgarh's steel industry maintain its leadership and contribute significantly to India's economic growth.

Conclusion : Chhattisgarh's steel industry is poised for remarkable growth, driven by its rich resource base and expanding production capacities. With substantial increases in iron ore and coal production, along with growing steel-making facilities, the state is on track to enhancing its contribution to India's steel sector. Continued infrastructure development and resource optimisation will enable Chhattisgarh to maintain its competitive edge in the global steel market.

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